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Bank of America Merrill Lynch Rated McCormick as a ‘Buy’

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Price movement

McCormick & Company (MKC) has a market cap of $11.4 billion. It rose 0.88% to close at $90.38 per share on December 6, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.0%, -3.2%, and 7.0%, respectively, on the same day.

MKC is trading 1.7% below its 20-day moving average, 3.8% below its 50-day moving average, and 6.8% below its 200-day moving average.

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Related ETF and peers

The SPDR S&P 500 ETF (SPY) invests 0.06% of its holdings in McCormick & Company. The YTD price movement of SPY was 10.4% on December 6.

The market caps of McCormick & Company’s competitors are as follows:

  • Kraft Heinz (KHC): $97.4 billion
  • Tyson Foods (TSN): $20.4 billion
  • ConAgra Foods (CAG): $16.5 billion

MKC’s rating

On December 6, 2016, Bank of America Merrill Lynch initiated the coverage of McCormick & Company with a “buy” rating and set the stock’s price target at $100.0 per share.

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Performance of McCormick in fiscal 3Q16

McCormick & Company (MKC) reported fiscal 3Q16 net sales of $1.09 billion, a rise of 2.8% compared to net sales of $1.06 billion in fiscal 3Q15. Sales from its Consumer segment rose 5.0%, and sales from its Industrial segment fell 0.09% in fiscal 3Q16 compared to fiscal 3Q15.

The company’s net income and EPS (earnings per share) rose to $127.7 million and $1.00, respectively, in fiscal 3Q16 compared to $97.6 million and $0.76, respectively, in fiscal 3Q15. It reported adjusted EPS of $1.03 in fiscal 3Q16, a rise of 21.2% compared to fiscal 3Q15.

MKC’s cash and cash equivalents and inventories rose 23.8% and 4.6%, respectively, in fiscal 3Q16 compared to fiscal 3Q15. Its current ratio and debt-to-equity ratio rose to 1.1x and 1.7x, respectively, in fiscal 3Q16 compared to 1.0x and 1.5x, respectively, in fiscal 3Q15.

Quarterly dividend

McCormick & Company has declared a quarterly dividend of $0.47 per share on its common stock. The dividend will be paid on January 17, 2017, to shareholders of record on December 30, 2016.

Projections

MKC made the following projections for fiscal 2016:

  • sales growth of ~6% (excluding the impact of unfavorable currency rates), driven by an increase in base business sales, new products, pricing, and acquisitions
  • adjusted operating income growth of ~7%, which excludes the impact of special charges
  • adjusted EPS in the range of $3.75–$3.79, which excludes the impact of special charges totaling $0.07

In the next article, let’s discuss Skechers USA (SKX).

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